New laws against fiscal fraud 2012

On October 29th 2012, the Spanish parliament approved Law 7/2012 with the object of fighting fiscal crime. It is a mixture of new and the modification of the previous law. It is hoped that it will curb several categories of fiscal crimes.

Restriction on the use of cash

Any cash payment, in which one of the parties is acting as a company or as a business, will be limited to 2,500€ (or its equivalent in foreign currency). This amount will increase to 15,000€ if the payer is a non-fiscal resident in Spain and is acting as a private individual. The amount will be calculated by adding all the payments related to the same product or service.

Cash is defined as notes and coins, bearer cheques or any other financial instrument, intended to be used as a bearer currency.

Both the receiver and the payer will be fined 25% of the value of the transaction. If one of the parties involved voluntarily declare the transaction to the tax authorities within 3 months they will not be fined.

Increased responsibility of shareholders during liquidation

In the past it was common practise for shareholders to liquidate the assets of a company before bankruptcy as their liability was limited to the share holding. The new law makes the shareholders responsible for all benefits and incomes received from the company within two years before liquidation.

This is a dramatic change on the way a limited company (Sociedad limitada) works, and will prevent people from creating short lived companies with the only intent of profiting before liquidating a company with debts. It will also fight against the practice of “Carousel Fraud” (also called missing trader fraud) and similar VAT fraud schemes, which are costing EU governments tens of billions of Euros every year.

Obligation of informing the tax office over assets abroad

Any fiscal resident in Spain, (Spanish national or foreigner) will have to declare the information related to:

Bank accounts in foreign countries, that he has (or if he has access to)

Spanish tax authorities will punish the concealment of income on foreign assets with the maximum possible penalties depending on the level of fiscal crime. The sanction for breaching this obligation, shall be of a fine of 5,000 € for each set of missing data, with a minimum fine of 10,000 €.

In addition, properties discovered by the Spanish tax authority that have not been declared may be considered concealed gains and taxed until the last period of tax liability. The size of the fine will depend on each case.

Properties owned by individuals through companies

If a person owes money to the tax authorities, the Tax administration will be able to prevent the sale of properties owned by the same person through a company and in particular when the individual own more than 50% of the company. In this case the Tax authorities will be able to embargo the shares (thus preventing the sale of the properties).

Tax Fraud will be more difficult in Spain

This is just a fraction of the new laws measures by the government in order to fight tax evasion. This will also be helped by the new EU regulations and bilateral agreements on the sharing of fiscal information between different national tax authorities.